Its Greek fixed-line unit is bleeding about 100,000 customers a quarter as cash-strapped consumers turn to smaller, alternative carriers that benefit from the regulator's policies to undercut OTE's prices.

"The regulator is causing OTE a bigger problem than the economic crisis," Chief Executive Michael Tsamaz told Reuters in an interview on Tuesday. "We feel like sitting ducks... the company can't continue like that, it's a matter of survival," he said.

Debt-laden Greece is going through its worst postwar recession as a result of austerity policies imposed by the European Union and International Monetary Fund in return for a bailout.

OTE, 40-percent owned by Germany's Deutsche Telekom (DTEGn.DE), will soon start talks with employees at its Greek fixed-telephony unit to reduce the bonuses it pays on top of basic salaries and to scrap the practice of automatic pay increases with each year of employment, Tsamaz said.

These changes would help the company reduce its labour costs over the next three years by more than the 160 million euros

($212 million) targeted in a 2012-2014 wage deal that was agreed last year.

"It (the 160 mln euro-target) will be raised," Tsamaz, 52, told Reuters. "Discussions (with the labour union) are expected to start within the next two to three months," he said.

Under the deal struck in September, the first of its kind for a major Greek company, OTE's fixed-line employees agreed to wage cuts of about 11 percent, obtaining instead a no-firing guarantee.

Tsamaz said he would stick to the deal, despite a new law passed last month as part of Greece's EU/IMF bailout that scraps jobs-for-life status for older employees in former monopolies like OTE, where the government still holds a 10 percent stake.

"The new law abolishes permanent jobs at OTE, so it's in the labour union's interest to maintain the deal we have for the next three years and mutually agree on further cuts," Tsamaz said.

Labour unions at big companies have grudgingly accepted wage cuts but are still wielding enough political and organizational clout to resist outright firings. Meanwhile, employees in the private sector are suffering record levels of unemployment, currently at 21 percent nationwide, after austerity caused a wave of corporate closures.

OTE aims to cut its labour cost at the Greek fixed-line unit from 35 percent of revenues to 22-23 percent over the next three to four years, Tsamaz said.

This would be done with the help of wage cuts and by replacing fewer employees than those retiring, Tsamaz said. The company also plans to offer voluntary retirement programmes, provided the government sticks to promises to change their tax treatment.

DELAYS

OTE does business in Greece, Romania, Bulgaria and Serbia and derives about two thirds of its 5 billion euro annual revenue in its home market. Because of its dominance of Greece's fixed-line market, the company has to get the regulator's approval for its offers to customers.

Approval delays and the regulator's accounting practices cause OTE's prices to be about 50 percent higher than competitors', compared with a 10-15 percent gap in Europe, Tsamaz said.

The company hopes to get approval for new packages that would narrow the price gap to between 20-25 percent. That would allow OTE to suffer smaller revenue losses this year than the 8-9 percent it is currently predicting, Tsamaz said. "If they are approved, I believe the pace (of revenue drop) will be slower."

Regulation was also barring the company from expanding high-value services such as fast VDSL internet, Tsamaz said.

The company has also asked for government approval to sell its commercial satellite venture Hellas Sat, as part of moves to reduce its debt.

The sale, which is scheduled to take place within the next six months, would add 100-150 million euros to the company's cash flow, according to analyst estimates.

Some 763 million euros of OTE's bank loans fall due this year, followed by 894 million in bank loans and 1.24 billion of bonds in 2013. OTE has scrapped its dividend payment this year to preserve cash and is likely to do the same in 2013, Tsamaz said.

"Financial conditions and the debt repayments the company faces allow no dividend policy," Tsamaz said.

The company has said it was confident it will be able to repay or refinance the debt from asset sales already announced and cash flow.

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